By Sharon Nunn
Americans are spending more than expected this holiday season,
fueled by income gains, confidence in the economic outlook, buoyant
financial markets and modest inflation.
The boost includes in-store and online spending at
brick-and-mortar retailers such as Wal-Mart Stores Inc. and
Nordstrom Inc., which clocked the largest year-over-year November
sales increase in seven years. Home-furnishing stores and
electronics-and-appliance stores also logged strong spending
numbers, despite competition from online-shopping websites, which
also posted robust gains.
"It's an impressive start to the holiday season and probably the
best in the last few years," said Jack Kleinhenz, chief economist
at the National Retail Federation, a group that represents retail
stores. "When you put the pieces together, job and wage gains,
modest inflation, healthy balance sheet and elevated consumer
confidence...there's an improved willingness to spend."
Altogether, sales at online retailers, brick-and-mortar stores
and restaurants rose 0.8% in November from the prior month, well
above the 0.3% increase economists surveyed by The Wall Street
Journal had expected. That was up 5.8% from a year earlier, the
largest yearly November increase since 2011. Despite their woes
from online competition, general merchandisers such as department
stores fared well, registering a 3.6% sales increase from a year
earlier, the best November performance since 2010.
"Overall these data are much stronger than expected," said Ian
Shepherdson, an economist at Pantheon Macroeconomics, in a note to
clients. "People have the inclination and the wherewithal to
continue spending at a robust pace."
Taken altogether, the data suggest the U.S. is on track for
robust growth in the fourth quarter. Macroeconomic Advisers, a
forecasting firm, estimated the economy is growing at a 2.8% annual
pace in the October-to-December period, up from a 2.6% forecast
before the retail-data release. The Federal Reserve Bank of Atlanta
estimated a 3.3% growth rate.
One caveat: Spending is so strong it is outpacing income gains,
meaning Americans are saving at a slower rate, which could lead to
a spending slowdown later or the threat of rising debt levels.
Spending comparisons to last year were boosted by a weak holiday
season in 2016 for retailers, which were plagued by high
inventories and a slowdown in purchases by international tourists
amid a rising dollar.
This year, some brick-and-mortar stores appear to be better
managing their inventory. In their most recent quarter, both Macy's
Inc. and Kohl's Corp. said their stores had less excess merchandise
to clear out at steeply reduced prices. "We don't have the
albatross of a lot of extra inventory like we did last year,"
Macy's Chief Executive Jeff Gennette said in an interview on Black
Friday. That, in turn, resulted in less discounting, Mr. Gennette
said.
Mr. Kleinhenz said increasingly sophisticated website and app
advertising is helping brick-and-mortar retailers too. "It's a
combined strategy that retailers have developed that integrates the
use of the internet with the brick-and-mortar shopping approach,"
he said.
Since Nov. 1, online revenue has risen 24% compared with the
same period last year, said Slice Intelligence, a research firm
that tracks online purchase receipts. Online sales at Target Corp.,
Kohl's Corp. and Costco Wholesale Corp. rose the fastest, the firm
said, though Amazon continued to grow rapidly from a larger sales
base.
Better-than-expected quarterly results were reported by some
mall stalwarts that have been battered, including Macy's Inc. and
Gap Inc. "There is a consolidation taking place" in the apparel
market, Gap CEO Art Peck told analysts on Nov. 16. "Almost
regardless of consumer sentiment, we've got an opportunity to drive
growth and gain market share," Mr. Peck said, as the company closes
stores, remodels others and speeds up its product pipeline.
The closure of thousands of stores this year could be giving
those left standing a boost.
"On an overall basis, a portion of our improvement in our sales
trend is attributable to our targeted efforts to capture share from
competitive store closures in some of our trade areas, and we
expect this will continue, if not accelerate, through the holiday
season," Kohl's CEO Kevin Mansell told analysts in November.
Some businesses, meanwhile, are feeling a boost from the
stronger labor market. Pete Benck, owner of Madison, Wis.-based
vintage clothing store Good Style Shop, said this holiday season's
business has been stronger than last year's.
"We have had a lot of foot traffic, and I think there's a lot of
confidence in our consumers lately," Mr. Benck said.
The National Retail Federation expects consumers nationwide to
spend about 4% more during the holiday shopping season than they
had in 2016. That would make 2017 the strongest holiday season
since 2014. Mr. Kleinhenz said the U.S. appears to be on track to
meet that goal.
--Sarah Nassauer contributed to this article.
Write to Sharon Nunn at sharon.nunn@wsj.com
(END) Dow Jones Newswires
December 14, 2017 20:04 ET (01:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.